"Misguided" philanthropy and the super-rich

If you want to know how the media view the super-rich -- the 1 percent of the 1 percent, if you get the picture -- you could do worse than read two pieces in the New York Times today. The first is the front page story about the way that Ronald Lauder (son of Estee Lauder) has managed to avoid paying hundreds of millions of dollars in taxes on his fortune over the past few decades. The article intones ominously about an evening on which his art gallery was celebrating its 10th anniversary:

Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code.

The elaborate tax strategies of the Lauder family are presented in great detail. Suffice it to say that legislators found one of his tactics so outrageous they passed a law to ban it immediately afterward. The fact that multimillionaires will use all the tools at their disposal to reduce their tax bills is not exactly news. So what will they do when the IRS cracks down on them and closes all the so-called "loopholes" that they are using to avoid high tax bills? Not much will change, I suspect. People like Ronald Lauder will move their money offshore, to other countries, anywhere they want. But that's not what we want.

Let's stipulate: This is a man who is perfectly willing to spend money. And, as the article points out, he has spent hundreds of millions on any number of philanthropic causes: His foundation has supported hospitals, rebuilt monuments, refurbished American embassies around the world. He has donated tens of millions to rebuild Jewish communities in Europe after the Holocaust and communism had decimated them. And then there is his art. He is a major donor to MoMa and the Metropolitan Museum of Art and, according to the Times, "The Neue Galerie, created by Mr. Lauder and Serge Sabarsky, who died in 1996, in a mansion once owned by Cornelia Vanderbilt, offers public viewing of an exquisite collection, worth more than $200 million even before Mr. Lauder added dozens of pieces for its 10th anniversary."

He ran for mayor of New York a few years back, and the Times estimates that he spent $363 for every vote he received (not literally, of course) for the Republican nomination. You can call it a vanity campaign if you want but much of that was money funneled into New York's economy, paying for staff, campaign signs, office supplies, etc. Ronald Lauder is not hiding his fortune under his mattress. He is spending money in ways that directly and indirectly improve both the economy and the culture of the place where he lives. But all the New York Times can consider is that he is not paying his fair share to the IRS.

Lauder probably has something in common with those people mentioned in the other philanthropy-related piece in the Times today, the so-called "policy-making billionaires." Lauder has not directed his fortune much toward remaking education or social services, so far as I know, but he probably thinks he knows how to spend money more effectively than the federal government. Come to think of it, many of us do...

In this piece, Nicholas Confessore cites the work of Bill Gates and more recently Howard Schultz, the founder of Starbucks, who is trying to fight unemployment at the local level through customer donations and his corporate foundation's donations to job training. Confessore wonders, "But the very loftiness of such ambitions raises a significant question: Can even the very wealthiest philanthropists finance public services on the scale necessary to achieve social change — that is, on the scale of government itself?" Well most of these philanthropists don't sit around wondering about that question because they believe that government has failed miserably at achieving social change. People like Eli Broad don't think: Oh I better be careful trying to achieve widespread educational reform because the federal government can do it better.

Confessore interviews Aaron Dorfman of the National Committee for Responsive Philanthropy, which is dismissive of these billionaires, to say the least. “I get it — there’s frustration when there’s gridlock, and sometimes people want to give money where government won’t. . . . But most philanthropists realize that good philanthropy can never be a substitute for government spending.”

These poor misguided souls. Soon they'll come around and realize that they should just line up and hand over their money to the IRS so that it can be given out by the smartest, most creative, most effective people around -- the bureaucrats in Washington.

One Response to ““Misguided” philanthropy and the super-rich”

Thank you for this witty article. You highlight an often overlooked and under-reported virtue of many of the super-rich (and many other wealthy individuals)–an interest in directing their wealth to the non-profit causes they care about.